Stocks opened lower on Wall Street Monday as oil neared $140 a barrel and after a report from the New York Federal Reserve on regional manufacturing activity showed a worse-than-expected contraction.
Oil jumped to a new record above $139 a barrel, before pulling back to the $137-138 range,even after weekend news that Saudi Arabia plans to increase output. A source close to the Saudi oil industry told CNBC.com that the 500,000-barrel-a-day goal may not be achievable.
Airlines, not surprisingly, took a beating amid surging oil prices, with multiyear lows across the board.
The New York Fed reported its Empire State manufacturing index fell to minus 8.68from minus 3.23 in May. It was the fourth contraction in the index in the past five months and was more severe than the minus-2 reading expected.
The market was buzzing about an article in the Washington Post this morning that said Federal Reserve Chairman Ben Bernanke doesn't plan to begin raising rates anytime soon.
"Speculation that the Federal Reserve is about to begin inflation-fighting interest rate increases appears to be dead wrong," Post columnist Robert Novak wrote, citing unnamed sources close to Bernanke.
Talk of the Fed beginning a tightening cycle has escalated since ECB chief Jean-Claude Trichet said a few weeks ago that the European central bank will soon begin raising rates to stifle inflation.
Morgan Stanley said the ECB will likely begin raising its rates in the next few months, something that, if the limited history in this area is any guide, could give European stocks a boost.
Blue chips took it on the chin.
CNBC.com-parent General Electricsaw its shares fall 2 percent after JP Morgan Securities downgraded the company from "overweight" to "neutral" and cut its earnings forecast.
IBM slipped after Citigroup dropped Big Blue from its recommend list.
Financials were back in focus.